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Lev, Tax Advisor
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Experience:  Taxes, Immigration, Labor Relations
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In a corporate Chapter 11, after the company receives its final

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In a corporate Chapter 11, after the company receives its final decree and exits Chapter 11, if it makes a profit in the years following can the company carry forward a pre-petition net operating loss to offset future income taxes or does it lose its NOL in the BK?


Hi and welcome to Just Answer!
If a corporate files for Chapter 11 protection - and it will have some debt cancelled - the amount of cancelled debt is generally included into taxable income.
Because of Chapter 11 protection - the corporate may exclude cancelled debt from taxable income, however such exclusion requires that certain tax attributes are reduced. In particular - a NOT is one of such attributes. So if the corporate has a NOL carried from previous years - the NOL shoudl be reduced by the amount of forgiven debt that is excluded from taxable income.
It will not loose a NOT - but the NOL should be reduced.

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